Government Failures in Development

TLDR

By the 1970s and early 1980s, governments in most developing countries were trapped in unworkable economic policies, and observers concluded that government failures far outweighed market failures. The essay examines how government behavior influences economic activity and growth in developing countries, exploring the nature of government, its comparative advantage, intervention dynamics, and a positive theory of political behavior.

Abstract

By the 1970s and early 1980s, governments in most developing countries were mired down in economic policies that were manifestly unworkable. Whether market failures had been present or not, most knowledgeable observers concluded that there had been colossal government failures. In many countries, there could be little question but that government failure significantly outweighed market failure. This essay focuses on insights relating directly to government behavior affecting economic activity and economic growth in developing countries. It briefly examines each of the following questions: 1) What is “the government”? 2) What is the comparative advantage of government? 3) What are the dynamics of government intervention? 4) Can a positive theory of political behavior be formulated that will help explain when and how alternative policies will evolve in the political arena?